UK microchip design company Imagination Technologies (IMG) saw its share price collapse on Monday after being ditched by its biggest customer, Apple. The Cupertino technology giant informed Imagination that in plans to stop using the group’s graphics intellectual property (IP) in new products in 15 months to two years time.
This is a hammer blow for Imagination and it sent its share price crashing, down 67% to 88.75p, effectively swiping close on £500m off its market value. The business is now worth less than £250m.
Cutting edge graphics
Imagination built its global reputation on developing bleeding edge graphics processing unit (GPU) technology. Despite expanding into central processing unit (CPU) tech (the brain that makes a computer device work), via its MIPS acquisition in 2013, and connectivity (Ensigma products), it is the firm’s PowerVR graphics expertise that is valued highest.
Apple is expected to be worth £65m of Imagination’s £140.3m revenue estimated for this year to 30 April 2017, according to one forecast.
The biggest blow
But the real blow to shareholders is the removal of the UK company’s most likely buyer. The thinking went, as a major technology supplier to Apple, taking Imagination in-house would secure core iPhone and iPad graphics technology and slam the PowerVR door to rivals.
Apparently not, because Apple says it is developing its own, separate graphics design in order to control its products and will be reducing its future reliance on Imagination's technology.
The UK company has responded by saying that it believes it will be extremely challenging to design a brand new GPU architecture from basics without infringing Imagination IP rights.
